CBS’s Quarterly Profit Beats Estimates on Programming Deals

CBS Corp. (CBS), owner of the most-watched
television network, reported fourth-quarter profit that beat
analysts’ estimates, helped by new programming agreements, and
accelerated its stock buybacks by $1.5 billion.

Net income rose to $470 million, or 76 cents a share, from
$393 million, or 60 cents, a year earlier, New York-based CBS
said today in a statement. Profit excluding some items was 78
cents a share, exceeding the 76-cent average of 27 analysts’
estimates, according to data compiled by Bloomberg.

CBS, home of police drama “NCIS,” the most watched show
on television, is using its ratings dominance to wring money
from distributors in so-called retransmission content fees,
which allow pay-TV services to provide the network’s signal to
subscribers. The network is also licensing more shows to
streaming services operated by Amazon.com Inc. and Hulu LLC.

“The beat was overall across segments,” Martin Pyykkonen,
an analyst at Wedge Partners, wrote in an e-mail. “Syndication,
including streaming, was a key part of revenue and margin
growth.”

Sales increased 5.8 percent to $3.91 billion in the
quarter, beating the $3.82 billion average of analysts’
estimates.

CBS said today it will buy back a total of $2 billion
shares in the current quarter. The total amount spent in the
first quarter is almost the same as the company spent on
repurchases in 2013, CBS said in a separate statement.

Significant Increase

CBS, controlled by Chairman Sumner Redstone, rose as much
as 4.4 percent to $64.59 in extended trading. The shares closed
up 1.6 percent to $61.85 in New York. The stock has declined 3
percent this year.

A deal with Time Warner Cable Inc. (TWC), announced on Sept. 2
after a monthlong blackout, represented a significant increase
in the monthly fee paid to CBS, almost double that of prior
contracts, people with knowledge of the terms said at the time.

Verizon Communications Inc. reached an accord with CBS in
August for its FiOS pay-TV system under similar terms, according
to Chief Executive Officer Leslie Moonves.

Operating profit at CBS’s entertainment division, which
includes the broadcast network, increased 31 percent to $368
million as sales rose 11 percent to $2.21 billion.

“Entertainment did better than I expected,” Brian Wieser,
an analyst at Pivotal Research Group, said in an e-mail.
“Network advertising was exactly in line with my expectations,
suggesting content licensing and distribution was very strong.”

Streaming Rights

During the last quarter, CBS agreed to provide Amazon with
streaming rights to episodes of the second season of “Under the
Dome.” In January it announced a deal to provide the online
retailer with rights to its new sci-fi series from Steven Spielberg called “Extant,” featuring Halle Berry.

Earlier this month, the network agreed to stream past
seasons of crime and police dramas “Elementary” and “Blue
Bloods” with Hulu.

The company’s local stations, including radio, produced a
profit of $236 million, a drop of 20 percent from a year earlier
when political advertising bolstered results. Revenue dropped
8.6 percent to $719 million.

The cable division, which includes Showtime, posted a
profit of $193 million, a 9.7 percent increase, as sales rose
8.9 percent to $477 million.

CBS also announced an agreement last week with the National
Football League to simulcast eight national games on Thursday
nights starting in September. The one-year deal can be extended
by a year by the NFL, which will also carry the games on the
league’s NFL Network cable channel. CBS paid $250 million to
$300 million for the rights, according to an estimate by Michael Morris, an analyst at Guggenheim Securities in New York.

(CBS executives will discuss results on a conference call
at 4:30 p.m. New York time. To listen, dial +1-888-601-3869 or
+1-913-312-1489 for callers outside the U.S.)